Insurance and financial professionals want you to think ahead. Planning for your future is sound advice that can pay off big time, not only for your financial health but also for your own comfort and peace-of-mind.
Planning ahead for your retirement years may be way down your priority list when you’re in your 20s, 30s, or even 40s. After all, when you’re starting out in the workforce, graduating college, or beginning a family - finding extra cash to put away for retirement can be difficult, at best. But you may be surprised to find out that the best time to plan for your golden years is when you’re still young and healthy.
In other words, don’t wait until retirement to get these insurance policies in place.
Long-Term Care Insurance
Your retirement plans may include living out your days (mortgage-free!) in your own home. You’re not alone. When asked where they prefer to live, most seniors prefer to age in place, rather than up and move.
Unfortunately, all it takes is one accident, injury, or unexpected event to turn all of your carefully made plans upside down.
When Lenora’s husband died, she intended to remain in their home for the rest of her days. But one day she slipped in her home, resulting in a compound fracture to her leg. Despite physical therapy, she was unable to fully recover from the incident. Her daughter moved in to help her with day to day activities. An in-home aid came in to assist. Eventually, the cost of in-home care and updating her home to accommodate her wheelchair became too much, and Lenora and her family went looking for a senior living facility.
The High Cost of Senior Care
Many seniors are completely unprepared for the high costs of senior care, whether it’s in-home assistance or the price of an assisted living community.
According to a 2018 Cost of Care Survey by Carescout, the average cost of an in-home health aide in California is $4,957 per month or $59,488 annually.
The average cost of assisted living or nursing home facility can average between $4,500 and $9,817 per month, or $54,000 to $117,804 annually.
Costs for memory care services for Alzheimer’s disease or dementia can be even higher, in the ballpark of $10k a month. If you or your spouse spent the last 10 years of your lives in a memory care facility, it could run upward of $1million.
What LTC Insurance Covers
Long term care (LTC) insurance can cover many of the costs of in-home care, assisted living facilities, and nursing homes. LTC insurance is designed to pay for services that aren’t covered by typical health insurance, such as assistance with routine activities like bathing, dressing, eating, or getting in and out of a bed or chair.
The earlier you can get LTC coverage, the better. Your age and health are some of the factors that determine your LTC rates and eligibility.
To put it simply, the older you are or the more health problems you have, the more expensive your premiums will be.
Wait too long, and you may not be able to get coverage at all.
Whole Life Insurance
Term life insurance is very popular for newlyweds and new parents who want an affordable life insurance solution. Term life insurance will pay out death benefits if something happens to you during the specified term.
Whole life insurance, on the other hand, works a little differently.
When you make a whole life premium payment, a portion of your payment goes toward your death benefit coverage. The other portion goes into a cash value savings account.
Death Benefits
Whole life death benefits are guaranteed, as long as you continue to make your payments, which means your beneficiaries will receive a payout if you should pass away tomorrow or live to be 100.
Cash Value
The "cash value" part of whole life policies acts as a savings account which is funded by a percentage of your premiums. Your life insurance company will then pay interest on the money in that savings account. The interest is actually a dividend from the insurance company’s annual profits, but most insurers guarantee a minimum yearly return.
You can withdraw or borrow against the cash value out of your whole life policy. Maybe you want funding to start your after-retirement dream career, purchase the vacation home you’ve been dreaming of, or to pay for your kids’ wedding or college.
It can take time to accrue the cash value component of your whole life insurance policy; most of the growth comes after you’ve held the policy for two or three decades. So the earlier you start investing in your whole life policy, the better.
There’s another reason to get started with whole life before you hit retirement age:
With very few exceptions, the younger you are when you buy a life insurance policy, the less you’ll pay for it.
Plan Now, Retire Easy Later
Imagine you - 30 years from now - comfortably able to afford in-home care or a luxury senior community with all of the bells and whistles. Imagine knowing that you have access to cash to fund your retirement dreams, or to cover any unexpected emergencies. And then imagine how much less it will cost you in the long run because you had the foresight to start planning early, when your health was at its highest and your premiums were at their lowest. Future you will undoubtedly have two words to say: thank you.